Yahoo CEO says Microsoft search deal underperforms

SAN FRANCISCO Wed Feb 13, 2013 8:41am IST

Yahoo Inc Chief Executive Marissa Mayer attends the annual meeting of the World Economic Forum (WEF) in Davos January 25, 2013. REUTERS/Pascal Lauener/Files

Yahoo Inc Chief Executive Marissa Mayer attends the annual meeting of the World Economic Forum (WEF) in Davos January 25, 2013.

Credit: Reuters/Pascal Lauener/Files

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SAN FRANCISCO (Reuters) - Yahoo Inc(YHOO.O) Chief Executive Marissa Mayer said the company's search partnership with Microsoft Corp (MSFT.O) was not delivering the market share gains or the revenue boost that it should.

"One of the points of the alliance is that we collectively want to grow share rather than just trading share with each other," Mayer said at the Goldman Sachs Technology and Internet Conference in San Francisco on Tuesday.

In her first appearance at an investor conference since taking the reins of the struggling Web portal in July, Mayer said she planned to prune a sprawling lineup of mobile apps and she reiterated her focus on enticing consumers to spend more time on Yahoo's online properties, in order to display more money-making ads.

"I'm not confused. Our biggest business problem right now is impressions. Basically can we grow impressions, can we get growth happening here," Mayer said.

Yahoo shares finished Tuesday's regular trading session up 31 cents at $21.21.

Mayer, 37, took over after a tumultuous period at Yahoo in which former CEO Scott Thompson resigned after less than 6 months on the job over a controversy about his academic credentials and in which Yahoo co-founder Jerry Yang resigned from the board and cut his ties with the company.

Yahoo's revenue in 2012 was flat year-over-year, at roughly $5 billion, and down from roughly $6.3 billion in 2010.

"We need to see monetization working better because we know that it can and we've seen other competitors in the space illustrate how well it can work," Mayer said of the search deal with Microsoft.

Yahoo and Microsoft entered into a 10-year search partnership in 2010, hoping their combined efforts could mount a more competitive challenge to Google Inc (GOOG.O), the world's No.1 search engine. But the partnership has not lived up to expectations.

Google remains the dominant search engine, with a 66.7 percent share of the U.S. market in December, almost unchanged from its 66.6 percent share two years earlier, according to online analytics firm comScore.

Microsoft had 16.3 percent share and Yahoo had 12.2 percent share in December, a reversal of two years earlier when Yahoo's U.S. search share was 16 percent and Microsoft had 12 percent share.

Yahoo's stock has risen more than 30 percent since Mayer took the helm in July, reaching its highest levels since 2008.

Analysts say that part of the stock's rise has been driven by significant stock buybacks, using proceeds from a $7.6 billion deal to sell half of its 40 percent stake in Chinese Internet company Alibaba Group.

Mayer said that she viewed the company's relationship with Yahoo Japan (4689.T), which is partly owned by Softbank (9984.T), as "strategic" to the company. Under previous CEOs, Yahoo had engaged in unsuccessful discussions to "monetize" its roughly 35 percent stake in Yahoo Japan.

(Reporting by Alexei Oreskovic; Editing by Phil Berlowitz)

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